Management Accounting: Budgets and Income Statement

This article covers the budgets and income statement in management accounting. It includes sales budget, schedule of expected receipts, purchase budget, cash disbursement for purchases, operating expenses budget, cash disbursement for operating expenses, and cash budget. The income statement is also presented. Subject: Management Accounting, Course Code: 1, College/University: Not mentioned.

Management Accounting
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We have the following data:
Particulars Data
Minimum Cash balance required at the end of each
month 12000
Selling price per unit 9
Ending inventory required 90%
of sale of next
month
Cost price per unit 6
Receipts for sales
- in the current month 25%
- in the next month 50%
- in the next to last month 25%
Payment made for purchases
- in the current month 50%
- in the next month 50%
Payment made for Selling and administrative expenses
- in the current month 100%
Operating Expenses
Variable
- Sales Commission (per unit sales) 1
Fixed
- Wages and Salaries 22,000
- Utilities 14,000
- Insurance 1,200
- Depreciation 1,500
- Miscellaneous 3,000
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Sales Budget: sales budget represents the expected units to be sold along with the expected
consideration. This is based on market demand and market trend (Boyd, 2013).
Sales Budget
Particulars April May June Total (April-June)
Units 35,000 45,000 60,000 1,40,000
Amount 3,15,000 4,05,000 5,40,000 12,60,000
Schedule of expected receipts: the following schedule represents the expected cash inflows
(Datar, 2015). The company receives 25% of the amount o sales made in the current month,
50% in the next month and the balance is received in the month following that.
Schedule of expected cash receipts
Particulars April May June Total (April-June)
Receipts for sales
- for the current month 78,750 1,01,250 1,35,000 3,15,000
- for the last month 1,68,000 1,57,500 2,02,500 5,28,000
- for the pervious to last month 48,000 63,000 78,750 1,89,750
Total 2,94,750 3,21,750 4,16,250 10,32,750
Purchase budget: the following budget represents the expected units of raw material o be
purchased along with the cost of the same (Datar, 2016).
Purchase Budget
Particulars April May June Total (April-June)
Closing units 40,500 54,000 36,000 1,30,500
Sale units 35,000 45,000 60,000 1,40,000
Less: Opening units 31,500 40,500 54,000 1,26,000
Units to be purchased 44,000 58,500 42,000 1,44,500
Amount 2,64,000 3,51,000 2,52,000 8,67,000
Cash disbursement for purchases: the following schedule shows the payments made in
connection with the purchases made. 50% of the purchases made prepaid for in the current
month and reaming are paid for in the following month.
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Cash disbursement for purchases
Particulars April May June Total (April-June)
Payment made for purchases
- for the current month 1,32,000 1,75,500 1,26,000 4,33,500
- for the last month 1,02,900 1,32,000 1,75,500 4,10,400
Total 2,34,900 3,07,500 3,01,500 8,43,900
Operating Expenses Budget: the following budget shows the expected expenses which are
likely to be incurred for running the activities (Horngren, 2012).
Operating expenses budget
Particulars April May June Total (April-June)
Variable
- Sales Commission 35,000 45,000 60,000 1,40,000
Fixed
- Wages and Salaries 22,000 22,000 22,000 66,000
- Utilities 14,000 14,000 14,000 42,000
- Insurance 1,200 1,200 1,200 3,600
- Depreciation 1,500 1,500 1,500 4,500
- Miscellaneous 3,000 3,000 3,000 9,000
Total 76,700 86,700 1,01,700 2,65,100
Cash disbursement for operating expense: the following schedule shows us the payment made
for the operating expenses. Insurance expenses have not been included in the below as they
we paid for in advance.
Cash disbursement for operating expenses
Particulars April May June Total (April-June)
Variable
- Sales Commission 35,000 45,000 60,000 1,40,000
Fixed
- Wages and Salaries 22,000 22,000 22,000 66,000
- Utilities 14,000 14,000 14,000 42,000
- Miscellaneous 3,000 3,000 3,000 9,000
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Total 74,000 84,000 99,000 2,57,000
Cash budget: the cash budget represents all the expected cash inflow sand outflows. It helps
us analyse the availability of the cash, so that measures in case of deficiency beforehand can
be made.
Cash budget
Particulars April May June Total (April-June)
Opening cash balance 14,000 12,000 12,000 38,000
Add:
Receipts during the month 2,94,750 3,21,750 4,16,250 10,32,750
Loan Taken 24,150 94,992 - 1,19,142
Less:
Payments for purchases 2,34,900 3,07,500 3,01,500 8,43,900
Payment for operating expenses 74,000 84,000 99,000 2,57,000
Payment for Land Purchased - 25,000 - 25,000
Payment of Dividend 12,000 - - 12,000
Loan Repaid - - 14,800 14,800
Interest on Loan - 242 950 1,191
Closing Cash Balance 12,000 12,000 12,000 36,000
Income statement: the following represents the revenues and cost of the company, along with
the profits which are likely to be earned for the period April to June.
Income Statement (Budgeted)
Particulars April May June Total (April-June)
Sales 3,15,000 4,05,000 5,40,000 12,60,000
Less: Variable Cost -35,000 -45,000 -60,000 -1,40,000
Contribution
Other fixed costs-
- Wages and Salaries -22,000 -22,000 -22,000 -66,000
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- Utilities -14,000 -14,000 -14,000 -42,000
- Insurance -1,200 -1,200 -1,200 -3,600
- Depreciation -1,500 -1,500 -1,500 -4,500
- Miscellaneous -3,000 -3,000 -3,000 -9,000
Profit 2,38,300 3,18,300 4,38,300 9,94,900
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Bibliography
Boyd, W. K. (2013).
Cost Accounting For Dummies. Hoboken: Wiley.
Datar, S. (2015).
Cost accounting. Boston: Pearson.
Datar, S. (2016).
Horngren's Cost Accounting: A Managerial Emphasis. Hoboken: Wiley.
Horngren, C. (2012).
Cost accounting. Upper Saddle River, N.J.: Pearson/Prentice Hall.
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